Marc Jacobs leaves LVMH

New York designer credited with turning Louis Vuitton into a top luxury brand is to take the Marc Jacobs brand public

Marc Jacobs and Kate Moss
Marc Jacobs, with model Kate Moss Credit: Photo: Rex Features

Louis Vuitton’s catwalk show, staged in Paris on Wednesday, opened theatrically with a loudly ticking clock, counting down the minutes to midnight.

It was a fitting tribute to Marc Jacobs, the company’s creative director who is leaving after 16 years to focus on his eponymous own label.

The New York designer, who is credited with turning Louis Vuitton from a staid luggage company into one of the world’s most successful luxury brands, is planning to taking the Marc Jacobs brand public in around three years’ time.

LVMH, the luxury group that owns Louis Vuitton and has had a majority stake in the Marc Jacobs label since 1997, said it has come to an agreement with the designer and his business partner, Robert Duffy, and will “assist them” with its initial public offering.

It is unclear whether that means LVMH will retain its majority stake in Marc Jacobs until it floated, or if the designer will secure private equity backing to buy LVMH out.

It would come with a considerable price tag. “When we started together, Marc Jacobs was a tiny business of around $20m [revenues],” Bernard Arnault, chief executive of LVMH said on Wednesday. “Now the totality of sales is approaching $1bn. It has been enormous growth.”

Louis Vuitton’s chief executive, Michael Burke, said it would invest in expanding Marc Jacobs’ network of stores. However, Marc Jacobs will also need to demonstrate its value as a standalone business if it wants to win over would-be shareholders.

“It is so intertwined with LVMH at the moment, it needs to be spun out,” said a senior source at a private equity company that is a serial investor in luxury fashion brands. Marc Jacobs, the designer, will be key in developing the business, but the company needs to avoid becoming overly reliant on a single figure, he added.

“It is very difficult to take a company public if it has got the bus risk – that is, if Marc Jacobs falls under a bus, the company loses its value. They need to sort that out, and to create more value by launching a broader range of products – more sheets and candles.”

Few of the fashion brands that have gone public are associated with a single, living designer. The most famous, Donna Karan, offers a cautionary tale. The company floated in 1996 and soared in value on the first day of trading, from $4 to $24 a share. However, investors fell out of love with the brand as it expanded too fast, and a year later the stock had fallen back to $9. It was acquired by LVMH, around the same time it bought into Marc Jacobs.

Michael Kors has had more success as a public company. The business listed at the end of 2011 at $20 a share, valuing the business at $1.18bn. Shares were trading at $76.18 at lunchtime in New York on Wednesday.

Most brands named after a single designer, such as Paul Smith, Stella Macartney or Vivienne Westwood, have elected to stay private.

Marc Jacobs’ exit from Louis Vuitton is not just about his own label, however. LVMH is keen to reinvigorate the brand, which notched up €7bn of revenues last year, and accounted for more than half of the luxury group’s operating profits

Mr Jacobs may be largely responsible for turning Louis Vuitton into an commercial powerhouse in the first place, but its growth has started to slow. According to Reuters, it fell from a growth rate of around 10pc every year to between 5pc and 6pc this year, well behind the rest of the luxury sector.

Fearful that Louis Vuitton is losing its lustre, LVMH is keen to take the fashion brand even more upmarket. It has called a halt to the rapid expansion of Louis Vuitton’s network of stores and is steering away from bags covered in its famous monogram, in favour of more discreet leather goods.

According to reports, Mr Arnault is close to hiring Nicholas Ghesquière, previously a designer at Balenciaga, to replace Mr Jacobs. It has already appointed Darren Spaziani, a former director of accessories at Proenza Schouler, who has worked with both Mr Jacobs and Mr Ghesquièrein the past, to develop a higher end range of top-end Louis Vuitton accessories.